Interest rate drops to 3.75% as Bank of Canada makes another cut

The Bank of Canada made a sizable cut to its key lending rate Wednesday from 4.25 per cent to 3.75 per cent as the global economy continues to expand. The half percentage point cut is the fourth rate cut in a row by the central bank as inflation dropped from 2.7 per cent in June to 1.6 per cent in September.

The Bank of Canada made a sizable cut to its key lending rate Wednesday from 4.25 per cent to 3.75 per cent as the global economy continues to expand.

The half percentage point cut is the fourth rate cut in a row by the central bank as inflation dropped from 2.7 per cent in June to 1.6 per cent in September.

“We took a bigger step today because inflation is now back to the 2 per cent target and we want to keep it close to the target,” Governor of the Bank of Canada Tiff Macklem said in a statement.

The central bank is expecting inflation to stay around 2 per cent in October as its surveys suggest business and consumer expectations of inflation have shifted downward and are approaching normal levels.

Macklem says the decline in inflation over the last few months reflects the combined effects of lower oil prices, a dip in shelter price inflation in Canada and lower prices for several consumer goods like cars and clothes.

If the trend continues, Macklem expects more interest rate cuts in the future.

“Now, our focus is to maintain low, stable inflation,” said Macklem. “We need to stick the landing.”